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Comparative Study of Momentum and Contrarian Behavior of Different Investors: Evidence from the Indian Market

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  • Bhaskar Chhimwal

    (IIT Bombay)

  • Varadraj Bapat

    (IIT Bombay)

Abstract

We examine the investment behavior of Foreign Portfolio Investors (FPIs), Domestic Institutional Investors (DIIs), and retail investors based on past returns in the Indian context. Using the quarterly shareholding and return data of Indian firms from 2009 to 2018, this study employs m × n momentum strategy proposed by Jegadeesh and Titman (J Finance 48(1):65–91, 1993). A robust correlation-based comprehensive technique is used to find momentum and contrarian behavior. It is observed that FIIs and DIIs show momentum behavior in the short run in the market whereas retail investors show contrarian behavior. Moreover, Retail investors’ contrarian behavior is found to be stronger in past losing firms. This study also reports that FIIs show the momentum behavior in service-oriented industries while contrarian behavior of retail investor is stronger in firms which require local knowledge. These findings may be useful for policymakers, portfolio managers and academicians in emerging markets economies.

Suggested Citation

  • Bhaskar Chhimwal & Varadraj Bapat, 2021. "Comparative Study of Momentum and Contrarian Behavior of Different Investors: Evidence from the Indian Market," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(1), pages 19-53, March.
    • Handle: RePEc:kap:apfinm:v:28:y:2021:i:1:d:10.1007_s10690-020-09315-3
    DOI: 10.1007/s10690-020-09315-3
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    Cited by:

    1. Chada, Swechha, 2023. "Economic policy uncertainties and institutional ownership in India," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).

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    More about this item

    Keywords

    Foreign portfolio investors (FPIs); Domestic institutional investors (DIIs); Retail investors; Momentum; Contrarian; India;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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